SINGAPORE — Going to work used to be a joyous affair for 43-year-old food delivery rider Roslan Yunos, but that has changed.

Since the start of 2023, he has had to deal with a slide in food orders as Singaporeans tighten their belts and a one percentage point rise in the Goods and Services Tax (GST) to 8 per cent.

As a result, stress and survival rather than joy dominate his mood, he said.

Mr Roslan, who has to pay child maintenance for his 14-year-old son each month, is one of many gig workers here feeling the pinch of inflation.

According to new data from DBS bank, these workers are spending more than they earn, and are forced to dip into their meagre savings to cover their day-to-day expenses.

But that would not last long, typically, as the DBS study found that the median gig worker has only enough savings to cover about 1.7 months of expenses should he stop working.

Mr Roslan said that he is also worried over the GST rising another percentage point to 9 per cent from Jan 1, next year.

While core inflation has eased gradually from a peak of 5.5 per cent earlier this year to 4.7 per cent in May, it remains high enough to bite into the purchasing power of consumers such as Mr Roslan.

Although Mr Roslan lives with his parents, other gig workers are also facing higher interest repayments on their mortgages, which adds to the cost of living crunch.

The DBS study also found that middle income earners are allocating close to 60 per cent of their income growth to service the increase in their monthly mortgage payments due to rising interest rates.

That leaves relatively little savings, discretionary spending, and investments.

The findings come from the fifth instalment of the DBS Financial Health series, which analysed an anonymised database of about 1.2 million of the bank’s non-wealth customers in May 2023 to find out the impact of high interest rates and inflation on Singaporeans.

NOT ENOUGH INCOME TO COVER EXPENSES

Gig workers recorded an expense-to-income ratio of 112 per cent in May 2023, which is to say that they spend about 12 per cent more than they earn.

This ratio is far higher than for the median DBS customer at 57 per cent who has 43 per cent of his income left after expenses.

Because gig workers' incomes are less stable, they have to tap their savings when their earnings don't cover their expenses.

As a result, the savings of the median gig worker fell to 1.7 months of expenses in May 2023 from 1.9 months the previous year.

That means they would run out of funds after less than two months if they found themselves unable to work.

The median DBS customer has enough savings to cover 3.5 months of expenses.

Mr John Koh, 46, who works six days a week and about 11 hours a day as a private-hire driver, said that he manages to save only about S$500 to $1,000 a month. 

He told TODAY that rising costs have caused him to cut back on his expenses for items that he used to buy — like tidbits, drinks or gadgets for the house. 

“If I want to buy anything, I will actually think it (through) maybe twice or even three or four times,” said Mr Koh. 

Mr Irvin Seah, a senior economist with DBS, said the recent easing in inflation does not mean that prices are coming down, but merely that “prices are rising at a slower pace”. 

“At about 5 per cent pace, inflation is still 2.5 times the historical average of about 2 per cent. Hence, a sustained growth in the income of the gig workers is important,” he said. 

RISING MORTGAGES MEAN LESS ROOM FOR SAVINGS AND OTHER SPENDING

Rising interest rates are also affecting middle-income earners, or those earning S$2,500 to S$4,999 a month, as mortgage repayments head north.

These earners allocate a hefty 59 per cent of their income growth to service these payments, more than any other income group.

This leaves them with less room for savings, discretionary spending and investments.

“Even though they do experience income growth… that additional increase in terms of income, a big part of it is actually being used to pay for the additional higher mortgage payment these days because of high interest rates,” said Mr Seah.

“So I think the middle income needs to be a bit more mindful in terms of their mortgage exposure.”

DBS said mortgage payments for those earning below S$5,000 a month had increased more than 12 per cent over the past year.

The report said that while the actual impact of rising mortgages may be mitigated by a dual-household income and having a portion of mortgage payable through their Central Provident Fund, potential stresses could emerge if income growth moderates, and interest rates continue to remain high.

In such a scenario, Singaporeans may have to dig deeper into their wallets when servicing their mortgages should income growth wane. 

DBS customers earning below S$5,000 may be hit when mortgages eventually get repriced on higher interest rates, with more than half of these customers having loans under floating rates, it added. 

A floating rate mortgage is one that moves according to market fluctuations in interest rates, broadly speaking.

The study also found that baby boomers, aged 59 to 77, and low-income customers saw “worsening wallet bandwidth”.

Both groups saw expense-to-income ratios rise to 86 per cent and 93 per cent respectively as expenses grew 5.5 times and 1.2 times faster than their income, suggesting poorer cash flows over the past year. 

In light of the rising cost of living, Mr Roslan fears for these vulnerable groups the most.

“Currently I am still young, I can pay for all these,” he said.

“But for the old people, they can't work. Like some aunties and uncles I see... some don't have children, how are they going to survive? It's very difficult.”